Setting Up for Future Deals When Negotiating

Thinking through multiple deals and the sequence of those events can help you drive a lot more value out of your negotiations.

When you go through any negotiation process, you have to realize that this deal sets up future deals. Consider this negotiation’s impact on future negotiations. If you don’t, you potentially can make some huge mistakes. Every deal sets precedent for the next one in terms of the numbers, the terms you come to, as well as the tone of that negotiation.

For example, if you’re selling a service and you decide you’re going to set a discounted rate upfront, set your list rate and then offer a discount off of that, versus just offering a lower rate without talking about the discount. Why? Because that rate is going to become permanent. So if initially you set a rate here and say “The first time out, I’m going to offer you a discount,” but then you can go back to that initial rate. If you set the rate here to start, you’re going to be stuck there.

I have this conversation with my instructors when we bring on new clients. And when we send those initial contracts and the invoices, we go to the trouble of saying, “Here are the list rates,” because that number is the number that’s going to survive this negotiation and be used going forward. If you make major concessions in a negotiation this time, trade on them the next time. If you set a precedent on pricing this time and you’re happy with it, refer back to it next time. Anything you do in today’s deal can be used in future deals. It can either benefit you if you’re thoughtful about it, or it can really harm you on the backend if you’re not thinking about it now.

I did a deal once where we overpaid on the purchase of a company because we had to. We were buying that organization back into our company. And we overpaid by a great deal. For future negotiations, we were able to use that price that we paid and extract concessions with those owners in the next deal. We set a much higher price in the future for what we wanted from them. Now the only reason we were able to set a higher price for something we were selling them was because we made the concession here and we traded on it very deliberately in a future deal.

Look at a negotiation you’re going through. Think through, “Will I be happy with the precedent I’m setting now the next time around?” If you’re not, think about changing that precedent. If you’re in the middle of a deal now, think back to a prior negotiation with that partner. Have you given up things in the past that you can get back now because you made those prior concessions? Thinking through multiple deals and the sequence of those events can help you drive a lot more value out of your negotiations.

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